Taking A Punch

The market took a punch this week.

If you’ve ever been punched in the face, you know what happens next—everything blurs for a second. Your plan disappears, instincts take over, and the urge to swing back is immediate.

The same thing happens in markets.

When prices drop fast, everyone wants to “buy the dip.” To hit back. But good fighters don’t throw wild punches after getting tagged. They reset their stance.

Hands high. Chin down.

Hands high means protecting your position. You’ve got clear risk levels and you respect them. If those levels break, you step aside. It’s not weakness—it’s defense. You can always get back in, but you can’t fight if you’re knocked out.

Chin down means staying composed. Keep your focus on what’s ahead, not the hit you just took. Emotional traders stare at the punch; disciplined ones watch for the next opening.

Here’s what I’m watching to see if the punches are over or if the next round’s about to start.

Rate of Change – The Pace of The Fight

One of the hallmarks of a bull market is quiet strength.

That steady grind higher while the world screams about everything else.

The 1-day rate of change shows who is in control of the pace of the fight.

It’s clear the Bulls have been controlling the pace, dictating when exchanges happen and keeping pressure on the bears.

But this time, the market finally “listened” to the noise and reacted.

A similar spike hit back in August, but notice what happened next: no follow-through.

Prices stabilized, volatility cooled, and the bulls quickly regained control.

Now the question is whether they can get it back, again.

If we see several more days of messy action, it could mean the bears are starting to push us to the ropes.

But if buyers steady the footing early next week, Friday’s hit might prove to be just another jab in a much larger uptrend.

Short-Term Breadth – Reading the Flurry

When a punch lands, the next question is simple was that the best they had, or are they just getting started?

That’s what short-term breadth helps me gauge.

It tells us whether the bears have already thrown a flurry or if they’ve still got gas in the tank.

As you can see, breadth is already pretty washed out, near levels where we typically see some kind of recovery.

That said, weakness is still spreading, not improving.

The key signal comes when breadth turns up from weak conditions, not while it’s still deteriorating.

Right now, it’s weak and getting weaker.

A cross back above 30%, paired with price reclaiming the 50-day, would be the setup I’d want to see.

That’s when you bite down on the mouthpiece and throw a punch, buying the dip with defined risk.

The market’s still in a structural uptrend, which makes this drop counter trend in nature.

That’s when composure matters most.

Either this was a quick jab to shake some weak hands or it’s the start of a heavier combination.

We’ll find out soon enough. Until then, hands high, chin down.

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